Traditional vs. For-Profit Education: Knowing the Difference

The recent growth in the for-profit education sector in the United States may sometimes confuse prospective students about the distinctions between these two types of schools. The key difference between a non-profit and a for-profit school lies in the financial objectives of the institution. A non-profit or "traditional" school does not seek to earn a profit for providing educational services, while a for-profit school is run more like a business and must therefore charge students a tuition that will generate a profit margin. The non-profit school category can include both public universities like the University of Michigan, and private universities like Harvard University. While these schools are called "non-profit," students will pay tuition to attend these education institutions. However, the school does not run as a business and will only charge student fees high enough to cover their operating costs. These institutions normally receive more financial support through their research activities, public funds, private donations, or likely, all of these funding sources will contribute.

According to the U.S. Senate Committee on Health, Education, Labor & Pensions, for-profit education has experienced a boom in the United States, with enrollment in for-profit schools increasing 225% from 1998 to 2008. However, for-profit education still represents a small portion of the overall post-secondary education sector, with less than 10% of all higher education students. While for-profit education has expanded significantly in recent years, most of these institutions are relatively new, whereas non-profit schools have long histories and established reputations. Non-profits are also more likely to have extensive alumni networks because their long histories have allowed for larger numbers of students pass through their doors.

For-profit schools like the University of Phoenix actively recruit students, as any other business would advertise for customers. Since students are viewed by for-profit schools as customers, for-profit schools can be more responsive to student complaints. They are also interested in showing the success of past students at getting jobs in their chosen fields. As a result, for-profit schools are more focused on career training, certificates, and practical training for students to apply directly to jobs when they finish their programs. Despite this, government data has shown that students who attended for-profit schools default on their student loans at higher rates than those who attend non-profit schools, which has led to scrutiny of federal education funds being available to students who attend these schools. However, no reason has been given to explain why students who attend for-profit schools default at higher rates.

For-profit schools generally have a strong interest in making their curriculum accessible to a variety of students. They typically have branches in multiple cities, offer night and weekend classes, and frequently make entire degree programs available online. These offerings expand opportunities for students who would otherwise be unable to complete degree programs at traditional, non-profit institutions because of the distance from campuses or the need to work while completing their schooling.

Non-profit colleges and universities are also increasingly starting to recognize the benefits of distance education and have expanded their online and evening course offerings to accommodate the modern student. Still, it is widely acknowledged the physical location of a traditional school helps to strengthen its alumni network, since all students attend classes on the same campus and share similar experiences which they can later reminisce about. Alumni networks are invaluable to graduates attempting to begin their careers.

Regardless of whether a student chooses to attend a for-profit or non-profit school, it is important to make sure the school is accredited, and to understand the type of accreditation it has received. In order to be considered legitimate, a college or university’s accreditation must be recognized by the U.S. Department of Education. Otherwise it may not be accepted in a chosen career field, or for purposes of continuing education. Therefore, when comparing schools, students should choose the program that best meets their needs, while also taking into account the school’s overall reputation and the type of accreditation it has received.